New Service Development involves experimentation unlike the development stage approach of new product development. Recently a financial services industry executive mentioned that there was no real need for them to develop a prototype, do a product use test and then go into large scale manufacturing followed by market testing and product launch. Here was the scenario the financial services executive from banking offered:
Let's say that we have the idea for a new type of deposit product. Perhaps it has a mix of insurance,annuity and growth features. All we do is to confirm the back end calculations, and legal compliance.Next we simply get into the launch and commercialization phase, put out the brochure at the branches and send an email to our branch based investment advisers to talk about the new product to any interested customers. We might even start an Internet campaign with PPC like Google AdWords. But all this is really launch and marketing… in case the product doesn't do well, we just stop promoting it. There is really no need for any service development.. our approach is experimental … if it works great !… if it does not , no problems because we had only spent very little money on the brochures.
Sure the above is a good rough and ready approach but it is not an experiment that can really fine tune the service product the bank is offering. It is possible, for example, to test different levels of insurance, annuity and growth among different segments of customers at a few selected bank branches. Doing so would have allowed a clearer idea of what the offering should be.
In other words, just because an organization has many branches does not mean that one more brochure appears at the brochure holder display near the cashier counter. The larger the organization, more the service offerings : after all they don't cost much to put out. But guess what ? The new service is never withdrawn because a few customers do sign up so the product is now in the financial reporting system as well as the CRM system. Like difficult product deletion decisions, no one really takes off a new service offering that just limps along. Unlike non-moving products that have inventory and associated raw materials, non-selling services do not appear in the balance sheet and therefore do not appear as an imminent threat. They just bring morale down for the sales and distribution folks. The "try if it succeeds" time window just gets smaller and chances of good service ideas becoming great successes, reduce.
Thus, it is a good idea for new service developers to go through the same early steps of the new product process but replace the development phase with well designed experiments that can give some clear guidance for new services that are market winners. Contact StratoServe.